How much is too much?

[MooseBucks]

Thanks for that information. Not sure where you got it, but it sounds legitimate and follows a current narrative at Disney.
This explains why they would expand 60 day fastpass reservations to some off-site guests. If they are filling up their hotels but still losing business, then they need to hand out more incentives to get off site guests to come to the park. This is especially true considering Universal's current and anticipated future growth.

Pulled straight from their annual reports.

 

[CraigInPA]

I don't think this has a huge impact, but I wonder what percent of that 10% occupancy growth is due rooms being taken out of service for VGF, Poly, and CCV DVC rooms. It could be that essentially the same amount of rooms are being sold, just out of less total rooms.
That would still allow them to justify raising prices, or at least reducing discounts offered, a bit, but would not show an increase in demand for their rooms.

Between 2008 and 2012, Disney was offering 35% off rack rate for the Poly during February. Last year, the discount was 5%. The decreased number of rooms may have been the cause. However, a similar change in CRO room discounts also occurred at Contemporary and Grand Floridian, neither of which decreased its stock of cash rooms. I suspect we're seeing the upturn in the economy being the primary mover in the higher occupancy rate.

 

[MooseBucks]

Between 2008 and 2012, Disney was offering 35% off rack rate for the Poly during February. Last year, the discount was 5%. The decreased number of rooms may have been the cause. However, a similar change in CRO room discounts also occurred at Contemporary and Grand Floridian, neither of which decreased its stock of cash rooms. I suspect we're seeing the upturn in the economy being the primary mover in the higher occupancy rate.

I agree that the economy is the primary driver but I believe Disney has done well in their answer to the upgrades that Universal has made in the past few years. Star Wars, Avatar and toy story are going to provided a way to attract folks when the next economic downturn happens and money is tighter. It's a lot easier to convince someone to come back to see these brand new areas with top of the line attractions then to come back and see the same Disney that saw just recently.

 

[richkaryn]

I tend to look at it this way- for example: a given week in October (Sat-Sat) 2018 would cost $1753 for a standard view cash room at CBR , and to rent at $19/pt for a garden/pool view studio at BWV or a standard view studio at BCV would be $1926 for the same week. For $173 difference, to me it's a no brainer.....the price difference is too insignificant for me to not consider renting, getting a bigger room at a resort with more offerings. (But, there are plenty who are satisfied to stay off property for cheaper......however, I'm not one of those people. I'll take my Disney bubble any day!)

 

[tjkraz]

Supply and demand... really Sherlock?

Again... will there be a point where rentals decline? What price point would it be?

Rentals are popular because of the cost savings. The only scenario where I see rental demand (thus pricing) declining is if Disney hotel rates decline. Aside from major economic downturn, Disney does not lower prices at its hotels.

You're effectively asking people to predict a downturn--or other unprecedented tragedy--which would prompt Disney to discount, while simultaneously deriding such comments for being vague and speculative. Really?

 

[_auroraborealis_]

So, using Poly as an example:

Fall 2018 rack is $585/687; this includes specific dates but skips Columbus Day. So, for one week from September 23-29, a Poly Standard would be $4299, pre-taxes.

The same week, a Poly DVC Standard - which, yes, we all know is not exactly the same - would be 99 points. To have that unit meet the rack rate of the hotel side, you would need to be paying $43/point in rental.

If you scored well and got 25% off that Standard (which is somewhat rare these days), that's still $32/point for DVC rental to make the costs equal.

Using $18 per point, the DVC rental would cost $1782. Same week at Pop is ~$1180 (but the room doesn't sleep 5). A room that sleeps 5 at POR is $1910 rack. With discount, POR will beat the DVC rental, but some may be willing to pay the $200-300 difference to upgrade.

So, the potential that the people who would normally stay Mod but upgrade to DVC might see the spread as too much is there, but the people who really want to stay at a deluxe, there is a LOT of room in the rates at a bunch of the resorts.

 

[Ben E N]

So, using Poly as an example:

Fall 2018 rack is $585/687; this includes specific dates but skips Columbus Day. So, for one week from September 23-29, a Poly Standard would be $4299, pre-taxes.

The same week, a Poly DVC Standard - which, yes, we all know is not exactly the same - would be 99 points. To have that unit meet the rack rate of the hotel side, you would need to be paying $43/point in rental.

If you scored well and got 25% off that Standard (which is somewhat rare these days), that's still $32/point for DVC rental to make the costs equal.

Using $18 per point, the DVC rental would cost $1782. Same week at Pop is ~$1180 (but the room doesn't sleep 5). A room that sleeps 5 at POR is $1910 rack. With discount, POR will beat the DVC rental, but some may be willing to pay the $200-300 difference to upgrade.

So, the potential that the people who would normally stay Mod but upgrade to DVC might see the spread as too much is there, but the people who really want to stay at a deluxe, there is a LOT of room in the rates at a bunch of the resorts.

This is a great look at the value of rentals. It points out how much it is worth to different groups of people. Fits in very well with the "Does DVC make financial sense?" thread.
There are many groups of people, and the value of DVC makes sense to a point depending on what group you fit into. If you always go deluxe, rentals will pretty much always be worth it, unless you are addicted to daily housekeeping. If you are always looking to spend bottom dollar, then rentals will never make sense, even at $10/pt. There will always be cheaper off site options.
I fit into the usually moderate crowd, but also as a Disney Lover. To me, rentals would make sense up to about $18 per point, but then frugality would set in. For people who like the value resorts more, their number may be $16. As these resorts raise their rates, these values will also go up.

 

[disneynutz]

Question is at what point does Disney do something to reduce rentals?

Bill

 

[MooseBucks]

Question is at what point does Disney do something to reduce rentals?

Bill

What can they do to reduce rentals without alienating owners? I'd think lower the difference between their prices and rentals which is unlikely or no longer allow rentals which is even more unlikely.

 

[Ben E N]

Question is at what point does Disney do something to reduce rentals?

Bill

I would bet that Disney enjoys the rentals, only second to people staying on property. If their hotels are selling at over 80% capacity anyway, there is not huge concern there. The next best thing is having people locked into staying somewhere on property. It makes it harder and more expensive for people to travel off of property (they would have to either rent a car or Uber). This means more dollars spent on parks and food.

 

[_auroraborealis_]

Has nothing to do with "alienating owners." Renting is explicitly permitted by contract, and changing that unilaterally may not be possible (and constitutes a significant material change that could be challenged as a class action, as I understand things).

I suppose they could force any reservation that does not include a deeded owner to be done by phone, but most renting owners aren't going for the cutthroat 8AM bookings for their renters anyway, and the number of easy workarounds there are legion.

 

[MooseBucks]

Has nothing to do with "alienating owners." Renting is explicitly permitted by contract, and changing that unilaterally may not be possible (and constitutes a significant material change that could be challenged as a class action, as I understand things).

I suppose they could force any reservation that does not include a deeded owner to be done by phone, but most renting owners aren't going for the cutthroat 8AM bookings for their renters anyway, and the number of easy workarounds there are legion.

From what I've read it is clearly called out in the rules and regs about renting and the rules and regs are able to be amended at the sole discretion of DVC Management.

Amendments
DVC Operator reserves the right to amend these Rules and Regulations, in its sole, absolute and unfettered discretion. These changes may affect a Club Member's right to use, exchange and rent the Club Member's Ownership Interest and impose obligations upon the use and enjoyment of his or her Ownership Interest and the appurtenant Club Membership. Club Members will be notified of any such changes through Member Services publications. Current publications supersede prior publications with respect to the terms and conditions of these Rules and Regulations.

 

[_auroraborealis_]

From what I've read it is clearly called out in the rules and regs about renting and the rules and regs are able to be amended at the sole discretion of DVC Management.

That's why I said it would be something that could be challenged. It could be construed as changing the held value of the property interest.

 

[MooseBucks]

That's why I said it would be something that could be challenged. It could be construed as changing the held value of the property interest.

I'm not an attorney but how can you challenge something that clearly says "DVC Operator reserves the right to amend these Rules and Regulations, in its sole, absolute and unfettered discretion. These changes may affect a Club Member's right to use, exchange and rent the Club Member's Ownership Interest and impose obligations upon the use and enjoyment of his or her Ownership Interest and the appurtenant Club Membership."

I feel like it is equivalent of trying to challenge Disney for removing membership extras. All owners are notified that these offerings can change at any time and they have the ability to decide what you can and can not do.

 

[_auroraborealis_]

Well, just because a contract says something doesn't mean that it is enforceable, generally speaking. Happens in real estate a lot.

 

[disneynutz]

Once something becomes popular, Disney will take a look at it to determine how it affects their profit. If it does, they will find ways to make it less popular like limiting the number of guest reservations. All they have to say is that they want to give owners a better chance to obtain their desired reservations and based on member feedback, the rules are now changed.

Bill

 

[Ben E N]

Once something becomes popular, Disney will take a look at it to determine how it affects their profit. If it does, they will find ways to make it less popular like limiting the number of guest reservations. All they have to say is that they want to give owners a better chance to obtain their desired reservations and based on member feedback, the rules are now changed.

Bill

This makes total sense to me. I really would not worry about them cancelling or trying to limit rentals if you are an owner who typically rents out, though. DVC rentals seem to fit into a nice little niche. They tend to be a bit pricier than the typical moderate, but provide much less service than paying for the full deluxe hotel experience.
If Disney really wanted less people renting their points out, they would have either dedicated less units in Poly and WL to DVC rooms, or would have put restrictions into place.
I actually see it benefitting them to have these rooms rented out vs. having owners stay in them. The people renting them are more likely to not have annual passes, and are also more likely to try different restaurants and experiences on property vs. people who come on a yearly basis.

 

[tjkraz]

From what I've read it is clearly called out in the rules and regs about renting and the rules and regs are able to be amended at the sole discretion of DVC Management.

Thing is, the single largest renter of DVC points is Disney itself. All of those villas listed with cash rates on the Disney websites are basically rentals; they are timeshare villas part of a condo association which are being leased to non-owners for cash considerations.

Yes, Disney can change many rules. But I'm not sure courts would uphold a policy which applies clearly different rules to owners vs. Disney itself.

 

[_auroraborealis_]

But I'm not sure courts would uphold a policy which applies clearly different rules to owners vs. Disney itself.

Especially if the only beneficiary of a contract change was Disney.

 

[CraigInPA]

Using $18 per point, the DVC rental would cost $1782. Same week at Pop is ~$1180 (but the room doesn't sleep 5). A room that sleeps 5 at POR is $1910 rack. With discount, POR will beat the DVC rental, but some may be willing to pay the $200-300 difference to upgrade.

You're missing one very important part of the calculation... taxes. DVC has no tax on rooms, while a CRO rental carries a 12.5 of 13.5% tax that should be added to the net price paid. Thus, the POR $1910 rack rate really is $2148. Assuming you got a 20% discount at POR, it brings the price to (1910*0.8*1.125)= $1719. Still beating DVC, but only by $63.